Business Stepping Up on Climate Change?
I’ve worked with dozens of companies since 1988 to explore their climate change risks and develop climate responses and strategies. The perceived role of business in climate in addressing climate change has steadily grown since the early days of climate action and strategy. Today you can find hundreds of blogs, articles, and books discussing the role of business in addressing climate change, ranging from “business is the only available answer” to “business is the real problem.” These two visions of “business and climate change” could hardly be more different.
The recent election results have stepped the conversation up yet again. Many business and some environmental observers argue that business will step in where the Trump administration fears to tread. In that context, Christopher Wright’s and Daniel Nyberg’s new paper “An Inconvenient Truth: How Organizations Translate Climate Change into Business as Usual” is interesting. The paper notes that the field of organizational management has paid remarkably little attention to the topic of climate change. The authors suggest “’an inconvenient truth’ for management scholars; the folly of over-dependence on corporations and markets in addressing one of the gravest threats to our future.” They note:
“there is limited knowledge of how firms integrate or balance competing environmental and economic concerns. Beyond the lack of empirical studies, it is not clear conceptually how firms that are continuously facing competing internal and external criticism manage the tensions that come with complex challenges.”
Of course, there is no more a single business view of climate change than there is a single public view of climate change. The Yale Program on Climate Communications has identified and tracks six distinct subsets of the American public and their climate beliefs, ranging from “alarmed” to “dismissive.” Knowing which of these “Six Americas” an individual belongs to tells you something about the kinds of communication strategies that might be most effective in communicating climate change issues.
There is no equivalent mental model for how business decision-makers think about climate change. That makes it difficult to assess the direction of the “business and climate change” conversation, or to have much confidence in any claims regarding the climate outcomes of business initiatives and commitments. As Wright and Nyberg note, there is much we still need to learn.
Let me suggest one potential avenue of investigation: a potential Six Business Americas typology. Further investigation of this would substantially buttress business and climate conversations.
- Decision-makers who see their company’s future as fundamentally threatened by any climate policy that substantially would slow climate change. This perspective can encourage decision-makers to be skeptical of or even deny climate science, or to jump directly to the “we’ve always adapted, we’ll adapt again” storyline made famous by Exxon’s Rex Tillerson.
- Decision-makers who aren’t part of the “business and climate change” conversation. This group includes a large swathe of companies. It includes many small and medium-sized companies that don’t have the benefit of dedicated environmental or planning staff and whose decision-makers have limited knowledge of climate change topics.
- Decision-makers who recognize climate change as a serious societal problem, but don’t see it as a business problem. This might be because they perceive climate change as too far in the future to worry about its physical impacts, or they view aggressive climate policy as too unlikely to really think about. This group includes many large companies. Examples:
- In his 2016 letter to shareholders, Warren Buffett wrote: “As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries.”
- In a personal conversation, an electric utility CEO made three points about climate risk:
- Electricity is too important a commodity for policy-makers to adopt policies that would be disruptive to the industry.
- If policy-makers did adopt policies requiring large-scale changes to utilities’ transmission and generation systems, regulated utilities would receive their normal rate of return for the new spending and do just fine.
- If truly disruptive climate policy were adopted, and if utilities were not made whole, it still wouldn’t pose a serious management problem because the company’s competitors would be similarly disadvantaged.
- As noted off-camera by one electric utility CEO after giving a speech arguing strongly for climate policy, “I can say whatever I want since it’s never going to happen.”
- Decision-makers who approach climate change as a business issue to be addressed through corporate social responsibility (CSR) efforts. These companies may engage in climate change conversations and commit to climate change initiatives as part of their CSR portfolio, but don’t see climate change as particularly important to their business model. These companies may even continue to support opposition to climate policies and measures through trade associations.
- Decision-makers in sectors likely to benefit from climate policies that would accelerate the transition to a low-carbon economy. This group includes companies ranging from renewable-energy companies to ski resorts, whose decision-makers are nevertheless reluctant to take a strong advocacy position on climate change. They may see renewable energy as a winner with or without aggressive climate policy, for example, and worry that taking a strong advocacy position on such a politically contentious topic could damage their business.
- Decision-makers who see themselves as being on the front lines of efforts to address climate change. These decision-makers may have had a personal epiphany of some kind — what the late Interface CEO Ray Anderson referred to as his “spear to the chest” moment after reading Paul Hawken’s Ecology of Commerce to prepare for an upcoming speech to employees. Perhaps the decision-maker — by virtue of age or other background variable — takes climate change and a business leadership role for granted. These decision-makers are probably the most likely to advocate for strong climate policy, incorporate as B-Corps, and promote new economic models such as the circular economy.
A critical question is how business decision-makers are distributed across these “Six Business Americas”? Is the distribution shifting significantly? A simple reading of the business climate literature in the lead-up to the December 2015 Conference of the Parties in Paris — and in the aftermath of Donald Trump’s election — certainly seems to suggest that Business Americas Nos. 3 and 4 have shrunk dramatically in favor of explosive growth in Business America No. 6. One can ask, however, whether that conclusion is really true. If it is, we should explore what would explain the shift.
We need to move away from thinking about “the” business community and using essentially the same messaging to communicate with all private-sector decision-makers. What do decision-makers in each grouping think about climate change? How do they perceive their role in addressing climate change? Can business decision-makers turn into a powerful force for climate change advocacy?
If the answer to that last sentence is “yes,” which decision-makers might move from one Business America segment to another, and how is that best accomplished? Whether communicating climate risk issues, risk management issues, or climate advocacy solutions, climate messaging needs to reflect the existence of multiple Business Americas. To do that we first have to understand them.